Digital advertising and cloud computing strength positions Alphabet to grow
The Motley Fool Takes
Google parent company Alphabet is struggling with economic headwinds, such as unfavorable foreign exchange rates and weak consumer spending that have led to slashed advertising budgets. Third-quarter revenue rose just 6% year-over-year to $69 billion (or 11% in constant currency), while earnings fell 24%.
That said, Alphabet’s long-term prognosis is very good. Google is by far the dominant search engine worldwide, and that competitive advantage has propelled it to the top of the advertising industry.
Alphabet has also developed a strong presence in cloud computing. Google Cloud Platform is a distant third in market share for cloud infrastructure and platform services. However, analysts at Gartner recently noted that Google Cloud Platform had “both the highest percentage of revenue gains and improvements” across critical capabilities of any vendor over the past year.
With leading positions in digital advertising and cloud computing – two large and growing markets – Alphabet is well positioned to grow. It also looks attractively priced, with a price-to-earnings ratio recently below 19, and shares down more than 35% year to date.
(Suzanne Frey, an executive at Alphabet, is on The Motley Fool’s board of directors. The Motley Fool owns shares of and has recommended Alphabet.)
Ask the Fool
From PD, Shenandoah, Iowa: What are dividends in the stock world?
The fool answers: These are payments from a company to a shareholder. A company can do various things with its money, such as paying off debt, or investing in further growth by hiring more workers, building more factories and so on. If executed well, those moves can benefit shareholders in the long term. The company can also reward shareholders more directly. One way is to buy back shares, which makes the remaining shares more valuable. Another is to provide dividends to shareholders; this is typically through quarterly cash payments, although sometimes with stock. Investing in healthy and growing companies that pay dividends is a good strategy, but some great companies don’t pay dividends – often because they’re still growing fast and want to invest their money to fuel their growth.
From TG, Westwood, NJ: What is the US inflation rate, and how does it compare to that of other countries?
The fool answers: Our annual inflation rate was recently 8.1%, according to the International Monetary Fund, well above our long-term average of about 3% per year. People have been paying a lot of attention to inflation in the US lately, but much of the rest of the world is also facing steep inflation. Here are recent annual inflation rates for many countries, in ascending order:
- Switzerland and Taiwan: 3.1%
- Bolivia: 3.2%
- Norway: 4.7%
- France: 5.8%
- Canada: 6.9%
- Mexico: 8%
- Germany: 8.5%
- Italy: 8.7%
- Botswana: 11.2%
- Poland: 13.8%
- Nigeria: 18.9%
- Czech Republic: 16.3%
- Ethiopia: 33.6%
- Turkey: 73.1%
- Venezuela: 210%
- Zimbabwe: 284.9%
Those annual rates are shocking, but not unheard of. When inflation reaches 50% or more per month, it is considered “hyperinflation”, a miserable economic situation.
Unemployment is pretty low these days — with a recent national rate of just 3.7% — but that doesn’t mean some people aren’t losing their jobs. Here are some things to do if you lose yours.
- Assess your financial situation and perhaps revise your budget and cut out unnecessary expenses. Don’t cash out your 401(k) if you can help it, because even small amounts saved and invested can grow big if left to grow.
- Feel your feelings. It is very reasonable to feel hurt, angry and/or scared. You may even feel ashamed, but don’t let that stop you from letting others know that you’ve lost your job, because they may be able to comfort or help you. (Avoid badmouthing your former employer on social media or in interviews, as this can make you look unprofessional or unattractive to potential employers.)
- Reach out to your network of former and current colleagues and people you know in your field. Ask them to keep you in mind when they hear about openings that might suit you—and maybe put in a good word for you. (It’s smart to cultivate a strong network before you need it. Build lots of professional relationships and nurture them over the years through the occasional coffee or lunch, sharing articles of interest, and so on.)
- Don’t expect great success from mailing lots of letters and resumes. According to some reports, about 70% of jobs are not publicly listed on job sites, and up to 80% of jobs are filled through personal and professional connections.
- Take some time to read up on job search advice, interview tips and suggestions on how to advance your career. (It might be smart to earn a new certification or designation, for example.)
- Improve your LinkedIn profile and become a regular visitor to sites like Indeed.com, Glassdoor.com and Monster.com.
Losing a job is no fun, but your next job could end up being much better.
My smartest investment
The smartest investment I know was my grandmother’s. She bought shares of United Telephone and Electric in 1927. It was then a small company that bought up telephone companies and other businesses. Her banker was pessimistic about the future and advised her to sell her shares, but she did not. I received some of her stock as part of her estate, and by then, after several mergers and convolutions, it was worth tens of thousands of dollars in shares of Sprint.
The fool answers: Your grandmother did what is not easy for many investors to do – she persevered for decades, through good times and bad, and made her investment grow and grow over time. Not every company will continue to grow for decades, so one should never just blindly hold on for a long time. But as long as a company is growing and ready to keep doing it, it’s often a smart move to do nothing and just be patient.
Sprint’s history is a complex one. It is now part of T-Mobile US, having merged with it in 2020. With a recent market value close to $180 billion, T-Mobile is now one of the largest telecommunications companies in the US, along with AT&T, Verizon and Comcast. It expects its 5G network to cover 97% of Americans by the end of the year and its ultra-capacity 5G network to cover 90% by the end of 2023.
who am i
I trace my roots back to 1938, when four brothers boosted their family’s tobacco distribution business by introducing chewing gum. I introduced Bazooka glue in 1947 and introduced a set of 407 baseball cards in 1952. My offerings now include cards for Major League Baseball, Major League Soccer, UEFA Champions League, Bundesliga, National Hockey League, Formula One, Star Wars and Garbage Pail Kids. I host sports and entertainment shows and recently released my own NFTs – “Non-Flushable Tokens.” My card business was bought by Fanatics Holdings in 2022, and my candy business was kept by the previous owners and rebranded as Bazooka Companies.
Can’t remember last week’s question? Find it here.
Last week’s trivia answer: Kroger.